Other Social Insurance and Veterans' Programs: Unemployment Insurance

DiSimone, Rita L., Social Security Bulletin

This section provides data on programs not covered in the preceding sections: Unemployment insurance, workers' compensation, temporary disability insurance, Black Lung benefits (a specialized workers' compensation program for coal miners), and veterans' benefits. Unemployment insurance is a Federal-State program. Workers' compensation is State administered except for the provisions for Federal employees and longshore and harbor workers, which are federally administered by the Department of Labor. Temporary disability insurance is in effect in seven jurisdictions. It

is State administered in five States and the Commonwealth of Puerto Rico, and is administered by the Railroad Retirement Board for railroad workers. Federal benefits for veterans and dependents are administered by the Department of Veterans Affairs. The tables on Black Lung benefits cover the part of the program administered by the Social Security Administration (1973 and prior year claims). Claims arising after July 1973 are administered by the Department of Labor.

Unemployment Insurance

Through Federal and State cooperation, unemployment insurance programs are designed to provide benefits to regularly employed members of the labor force who become involuntarily unemployed and who are able and willing to accept suitable employment. Workers in all 50 States, the District of Columbia, Puerto Rico, and the Virgin Islands are covered under unemployment insurance programs.

To induce States to enact unemployment insurance laws, the Social Security Act of 1935 provided a tax offset incentive. A uniform national tax was imposed on payrolls of industrial and commercial employers who employed eight or more workers in 20 or more weeks in a calendar year. Employers who paid taxes to a State with an approved unemployment insurance law could credit (offset) up to 90 percent of the State tax against the Federal tax. This insured that employers in States without an unemployment insurance law would not have an advantage competing with similar businesses in States with such a law because they would still be subject to the Federal payroll tax, and their employees would not be eligible for benefits.

In addition, the Social Security Act authorized grants to States to meet the costs of administering the State systems. By July 1937, all 48 States, the then territories of Alaska and Hawaii, and the District of Columbia had passed unemployment insurance laws. Later, Puerto Rico adopted its own unemployment insurance program, which was incorporated in 1961 into the Federal-State system. A similar program for workers in the Virgin Islands was added in 1978.

If employers are to receive an offset against Federal taxes and if States are to receive Federal grants for administration, Federal law requires State unemployment insurance programs to meet certain requirements. These requirements are intended to assure that a State participating in the program has an unemployment insurance system that is fairly administered and financially secure.

One requirement is that all contributions collected under State. laws be deposited in the unemployment trust fund of the U.S. Treasury Department. The fund is invested as a whole, but each State has a separate account to which its deposits and its share of interest on investments are credited. At any time, a State may withdraw money from its account in the trust fund, but only to pay benefits. Thus, unlike the situation in the majority of States having workers' compensation and temporary disability insurance laws, unemployment insurance benefits are paid exclusively through a public fund. Private plans cannot be substituted for the State plan.

Aside from Federal standards, each State has major responsibility for the content and development of its unemployment insurance law. The State itself decides the amount and duration of benefits (except for certain Federal requirements concerning Federal-State Extended Benefits); the contribution rates (with limitations); and, in general, the eligibility requirements and disqualification provisions. …

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